[jeff]

Post by Another71.

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AUD - 79
BEC - 80
FAR - 76
REG - 92

Jeff Elliott, CPA (KS)
NINJA CPA | NINJA CMA | NINJA CPE | Another71

[Anonymous]

@Leach That's what I thought too. Thanks!

[Satchman]

Just got home after taking the FAR section.

My take –

I felt the Multiple Choice Questions were way too easy. The first section i finished in breakneck speed. Took a break.

Resumed the Second testlet, spent like 8 mins in one question, rest were easy.

Third Testlet – easy MCQ's almost fell asleep at one point. There were two question where i probably I spent 5 mins each.

Overall, the MCQ's were fairly easy – there was nothing I had not seen before. I remember guessing only one question and maybe 2 or 3 educated guesses, Rest of the MCQ's I am pretty sure, I nailed it.

Took another break, and came back – I had 1 hr 20 mins left for the SIMS. Kinda got nervous there. The first SIMS just by the way it looked – I skipped it. Chose the sim that I was most comfortable with and so on. At first glance, I was so heartbroken thought the SIMS were very hard and got nervous. However, I finished all the SIMS did all the journal entries and I am pretty sure I messed up the SIMS big time, because at the pace I was doing it was crazy.

I had slept only three hours night before the exam, cudn't fall asleep. I felt as if my brain was fried when I got to the sims. Nevertheless, reflecting upon it right now, I think the SIMS were not that hard. It was just that, I was not well rested and looking at the sims my brain prolly short circuited, since they were very long and had some much text – kind of intimidating. In addiiton, I never really practiced any sims. I felt the exam was easy on the whole – not challenging.

Finally, I would not be surprised if I fail or if i score a 90+.

Tip – I practiced all the Wiley test bank questions, and I cannot emphasize more what a valuable source it is. WTB is a must.

Make sure you are well rested !

Make sure you save enough time for the SIMS. If you have time you shud be able to figure out the sims.

[Yaw]

The Jackson Foundation, a not-for-profit entity, received contributions in 20X1 as follows:

Unrestricted cash contributions of $500,000

Cash contributions of $200,000 to be restricted to acquisition of property

Jackson's statement of cash flows should include which of the following amounts?

A.

Operating Activities: $700,000; Investing Activities: $0; Financing Activities: $0

B.

Operating Activities: $500,000; Investing Activities: $200,000; Financing Activities: $0

C.

Operating Activities: $500,000; Investing Activities: $0; Financing Activities: $200,000

D.

Operating Activities: $0; Investing Activities: $500,000; Financing Activities: $200,000

The correct answer in ninja MCQ is C and the explanation is below, however, i think it is B because cash paid for acquisitions are classified as investing activities.

The Statement of Cash Flows prepared by a not-for-profit entity uses the standard FASB categories. Unrestricted contributions are reported as operating activities while contributions restricted for long-term purposes (i.e., plant acquisitions) are reported as financing activities.

Anyone?

[Anonymous]

yawampofoh1, C is correct. fixed asset acquisition is a financing activity.

[Anonymous]

On December 30, 20X1, Rafferty Corp. leased equipment under a capital lease. Annual lease payments of $20,000 are due December 31 for 10 years. The equipment's useful life is 10 years, and the interest rate implicit in the lease is 10%. The capital lease obligation was recorded on December 30, 20X1, at $135,000, and the first lease payment was made on that date. What amount should Rafferty include in current liabilities for this capital lease in its December 31, 20X1, balance sheet?

A. $6,500

B. $8,500

C. $11,500

D. $20,000

The answer given is B but I don't understand why the interest portion of the lease payment due in the following year would not be considered a current liability as well. All of the $20,000 must be paid in the following year.

[excel monkey]

Since no time had passed since the last lease payment and the balance sheet date, no interest had accrued. The 11,500 of interest will accrue as year 2 passes.

Another way to think about it is whats on the balance sheet. At lease inception, you would have made the following journal entry:

Dr. Leased Equipment 135,000

Cr. Lease Payable 135,000

At first payment:

Dr. Lease Payable 20,000

Cr. Cash 20,000

These two journal entries would take us to the balance sheet date. Therefore, on 12/30/20×1, all we have as a liability is our lease payable. There is no interest payable on the B/S to classify as a current/non-current liability.

FAR - 91
AUD - 88
BEC - 86
REG - 79

[Satchman]

@CTM

This is good question. I have seen a lot of people encountering the same problem.

You are right that $20,000 as a whole is a current liability. However, the whole amount of $20,000 is not liable to the leased asset. We have to separate two concepts here – The interest expense here is due to the fact that we are borrowing money. Therefore, the interest is treated as finance expense and not as a liability for the leased asset.

Along the same lines, if you remember in cash flow statements – when we have a financing activity such as issuing bonds – we don't include the interest paid on the bond as a financing activity but as an operating expense. Remember to separate the two (However, in IFRS you can choose either but you will have to do in a consistent basis). In US GAAP, all interest expense is treated as a finance expense and be treated as a operating expense.

For the above question – (135,000 – 20,000) = $115,000

($115,000 x 10%) = 11,500 = Interest Expense – Current Liabilty due to the finance expense

20,000 – 11,500 = $8,500 (Reduction in the lease liability – Current Liabilty to the lease liability)

All the best and wish you good luck

[Satchman]

@excel monkey @CTM

A current liability is a liability that is due within the next year. It does not have to be accrued first to be a current liability.

All the best guys

[Yaw]

@CTM, how would you classify in terms of cash flow, cash paid to acquire PP&E (a fixed asset)?

[Satchman]

@yawampofoh1

Cash outflow from investing activity

[Yaw]

@Satchman, that's exactly my point……so what would you have chosen as your best answer for the NFP question i posted earlier?

[Anonymous]

Thanks excel monkey and Satchman! As for the the treatment of the lease in the statement of cash flows, the key for me is to keep in mind whether I am looking at the lessor or lessee.

@yawampofoh1, I think the issue in the NFP's case is the fact that it is donated monies and not an actual purchase of fixed assets. Hence the treatment of the donation as a financing cash flow item as apposed to an investing item. The actual purchase of the fixed asset has not yet occurred. The NFP is reporting a donation and not a purchase. That is how I look at it.

[Determined CPA]

yawampofoh1 – cash used to acquire ppe would be investing. Any gain once sold would be operating.

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Yaw]

Detemined, your explanation is correct so is CTM's. the call of the question in relation to the property acquisition was the contribution made. The purchase of the fixed asset has not occurred yet. if only i could RTFQ!!

[John M]

Hi everyone! I have passed 2 parts and studied for REG (waiting on the score). However, I am on FAR lecture 2 through Becker and this is definitely the toughest by FAR (no pun intended). Is F2 generally a hard lecture for everyone? Does it get easier throughout FAR lectures or more difficult?

In serious need of reassurance because I'm losing my mind with this part of the exam.

Thanks!

AUD - 79
BEC - 81
REG - 80
FAR - 77

[Author]

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